California lawmakers prepare for battle over $8.8 billion surplus

California Gov. Jerry Brown's $199.3 billion spending plan toes the line on spending increases despite an anticipated surplus that has grown by $3 billion since January to $8.8 billion.

“This is a time to save for our future, not to make pricey promises we can’t keep,” Brown said. “I said it before and I’ll say it again. Let’s not blow it now.”

During his remarks Friday in announcing a revised budget proposal, as California governors do each May, Brown, a Democrat, warned again that the state now approaches its longest economic recovery ever, which could signal an imminent recession.

Tax collections are about $3.8 billion above what Brown anticipated in January, according to the State Controller’s Office. That comes on top of the $6 billion estimated surplus announced in January.

California Gov. Jerry Brown, a Democrat, could be at odds with Democratic majorities in the state legislature over an $8.8 billion surplus.
Bloomberg News

The governor wants the money to go to reserves and one-time expenses, but Democrats who control the state legislature have said they want more to combat homelessness and to expand the state's medical program for the poor to undocumented immigrants.

“It is easy to get giddy at the economic peak,” said Brown, who said he plans to limit increases to ongoing programs to address long-standing infrastructure needs, mental health and homelessness.

The legislature is supposed to pass a budget by June 15, so the governor can sign it by July 1.

“This will help us chip away at the $20 billion backlog the state has for deferred maintenance projects,” said Michael Cohen, director of the state’s Department of Finance.

Brown's budget would direct $359 million of bridge funding to programs to combat homelessness until funding from the real estate transaction tax signed by the governor last year flows to cities and counties.

The governor also supported putting a $2 billion bond measure to create supportive housing for mentally ill homeless people on the November ballot that would use money from an existing 1% surtax on incomes above $1 million for mental health programs. Legislation was approved two years ago to allow that money to be used for housing, but it has been hung up in court.

The governor’s budget would also provide $312 million for mental health services to provide training for mental health professionals and early identification of mental health problems.

He added another $96 million to prevent wildfires on top of the $160 million proposed in January’s cap-and-trade expenditure plan.

Brown didn’t increase the amount he wants to go into reserves. The revised budget maintains his proposal in January to direct $3.5 billion into the rainy day fund in addition to the $1.5 billion constitutionally required through legislation that created the fund in 2014.

In recent months, state legislators and 11 mayors have asked that $1.5 billion of the surplus go for programs to combat homelessness.

Brown said his plan for high-speed rail is to get Democratic majorities in the U.S. House and Senate and get a federal infrastructure bill that could help fund the project.

Brown said he asked Cohen to work on a framework for tax reform with Sen. Bob Hertzberg to help the next governor, who will be elected in November.

“I think it would be hard to get a bill passed this year, but we can put out a framework,” Brown said.

Democratic legislators have pushed for Brown to spend more money on programs for the poor and a plan to expand Medi-Cal to undocumented immigrants in the state.

“In these times of prosperity, we need to make sure that all Californians are along for the ride,” said California Assemblymember Phil Ting, D-San Francisco, who heads the Assembly Budget Committee.

He lauded the governor for prioritizing emergency grants to local governments to deal with the state’s homeless crisis, but said more needs to be done to expand health care to put the state on the path to universal coverage.

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